Hundreds of thousands of Gazans broke through the border to Sinai: Sympathizers and salesmen were happy, but the politicians weren't.
Hamas militants destroyed the border wall between Egypt and the Gaza Strip in late January, temporarily ending the seven-month Israeli blockade on the Palestinian territory and allowing an estimated 700,000 Gazans to pour into the Sinai Peninsula to buy everything from food, horses and stereo systems to fuel and motorcycles. Some estimates put the amount spent by Gazans during the breach as high as $250 million (LE 1.3 billion), while merchants on the Egyptian side took the opportunity to raise prices.
In the days before the breach, Israel had ordered a complete shutdown in response to rocket attacks from Gaza, causing food and fuel shortages in the 360-square-kilometer strip. Egyptian border guards eventually blocked the movement of Palestinians into Egypt using armored vehicles, water cannons and a human chain. Egyptian forces resealed the border with metal barriers and barbed wire and negotiated with Hamas to restore control.
Thousands protested in Cairo in a show of solidarity with the Palestinians and demanded Egypt do more to help. Nearly 500 protesters were arrested.
Rumors circulated that Israel had asked Egypt to take responsibility for the Strip and to supply Gaza with fuel and other goods after the breach, but Egypt denied this was the case. Israel supplies the territory with most of its fuel and controls the flow of goods in and out of Gaza. It frequently stops or limits shipments in response to attacks, a move that the United Nations Human Rights Council has called "collective punishment."
Egypt has had the task of balancing Israeli demands to keep the crossing closed with Hamas requests that it be opened. Cut off from the rest of world, Gazans have used tunnels to smuggle food, fuel and weapons into their beleaguered enclave. Both the US and Israel have pressured Egypt to halt the smuggling but the tunnel economy remains a vital lifeline for the 1.5 million Palestinians of Gaza.
The Year of the Bread, or Lack Thereof High inflation and rising commodities prices deprived many Egyptians of their staple food: baladi bread
Queuing up during the early hours of the morning, hundreds of Egyptians stood in the seemingly endless bread lines outside bakeries to get government subsidized bread before it ran out. Fights in these lines led to the deaths of at least seven people in 2008, two of whom were stabbed during a fight, while the others expired from extreme exhaustion.
Rising global food prices stressed the budgets of already poor Egyptians and subsidized bread became one of the last affordable sources of food. The rising demand for subsidized bread, coupled with a jump in the price of wheat, led to a severe shortage of Egypt's staple food. Several bakers were caught selling subsidized wheat on the black market instead of using it to bake the bread.
In order to keep the prices of bread affordable, the government spent an extra LE 4.8 billion on wheat. At the time of the crisis, a ton of wheat imported from the United States cost $430 (LE 2,300), up from $180 (LE 990) just two years ago. President Hosni Mubarak ordered the Egyptian army to bake and sell subsidized bread to the public from the army's own bakeries. According to CAPMAS statistics, the nation has 23,664 bakeries, 17,002 of which are licensed to sell subsidized bread.
On April 6, a general strike was organized to protest government inaction on several issues, including the lack of subsidized bread, and to show solidarity with a textile workers' strike in the Delta town of Mahalla. Between 10,000 and 27,000 people participated; 700 protesters were arrested and later released.
January
2007 ended with a bang as reports were confirmed that Orascom Construction Industries (OCI) was selling its cement arm to French company Lafarge for LE 71.5 billion. Lafarge also agreed to take on LE 11.4 billion of OCI's debt. In return, OCI chairman Nassef Sawiris bought an 11.4% stake in Lafarge and agreed to join its board. Egypt's economy was turning heads, reporting an increase of 6.8% in 1Q of FY2007-08.
The GDP from non-petroleum sources posted an even greater growth of 7.5%. Egypt's CASE index made its own news when it closed the year over the 10,000-point mark, riding high on the index's highest IPO yet thanks to Talaat Mostafa Group (TMG) that generated LE 18.7 billion. The CASE peaked at a monthly record of 11,035, before dropping a shocking 1,500 points.
Meanwhile, reaction to news of Banque du Caire's troubled bid for privatization led the government to issue a firm denouncement of rumors that state-owned pharmaceutical companies would follow suit. Egyptair also abstained from putting its name on the IPO list after showing improvements in strategic areas. The government took matters into its own hands and froze energy contracts until 2009 in a bid to stabilize the market, while Misr Insurance, El-Chark Insurance and Egypt Reinsurance merged to literally take over the insurance sector with a combined 75% market share.
February
Twenty executives from domestic cement companies were found guilty of price fixing and violating anti-trust laws, as well as raking in illegal net profits of between 50% and 80% over the cost of the cement sold. Executives from Suez Cement, Beni Suef Cement, Torah cement and Sinai Cement Company claim they were not guilty of breaching anti-competition legislation. Despite the industry's turmoil, cement prices remain around LE 415-430 a ton. This comes as the Consumer Protection Agency revealed its controversial findings on the bottled water industry: Schweppes and El Nada bottled water contained bacteria dangerous to human health, with the so-called 'mineral water' actually being drawn from local wells. After testing, Nahl, Aquastone, Aquamina and Hayat water brands did not meet quality standards, while Baraka, El-Manar, Delta and Meiah, as well as Aquamina and Nahl, had labels that did not match the bottles' contents. The agency blames antiquated pipes and/or poor treatment and filtration processes for the contamination.
In other news, The Bank of Alexandra announced it would sell 15% of its shares in the first half of February after releasing its 4Q2007 results. Mansour Group also announced plans to go public in the first half of 2008, despite its shares taking a beating on the CASE. But the biggest shock of February came when two undersea cables were cut, leaving Egypt with a virtual internet blackout and businesses and citizens floundering for three long days.
March
Orascom Telecom was given the first commercial license to sell mobile phone services in the People's Democratic Republic of Korea (North Korea) through its subsidiary CHEO Technology JV Company. The company plans to invest LE 2.2 million in the venture. Egypt's nuclear agenda wasn't as lucky. Director General of the International Atomic Energy Agency (IAEA), Dr Mohamed El-Baradei, put an end to the nation's nuclear dreams, saying Egypt didn't have the infrastructure necessary to meet the agency's safety requirements. That didn't stop the government from approving further petroleum-based product subsidies in the amount of LE 19.6 billion in response to fears oil and gas would continue to rise, which could only mean good things for BP Egypt and ENI, both of which discovered new gas reserves in Damietta and Suez.
Mobinil had reason to celebrate after releasing its 2007 figures. The company reported an increase of over 5.8 million subscribers compared to 2006, bringing its market share lead to more than 15 million subscribers. Inflation also jumped in March, hitting 14.4%. The Central Bank of Egypt responded by raising interest rates on overnight deposits and loans to 9% and 11%, respectively.
April
Inflation and the cost of living became key issues for thousands of disgruntled citizens who refused to go to work across Egypt on April 6. Around 500 people were arrested in the government's bid to prevent protestors from gathering in Cairo. The protest became a violent affair in the industrial town of Mahalla, with reports of police brutality against protestors and even deaths. Inflation continued to soar, with food increasing 20.5% on average between January and March, pushing inflation to 16.4%, up another 2% compared to March. Government statistics released in April showed grain prices had risen 48.1%, while fruit and vegetables rose 20% compared to a year ago. Light crude oil was also on the rise, hitting US$120 (LE 664) a barrel in futures trading in the US. The high price of oil didn't seem to affect the CASE as it recorded a new high of 11,754.53 points. Also rising were prices for natural gas and electricity for some of the most energy-intensive companies in the cement, steel, aluminium and ceramics sectors.
May
Apossible ban on the ruling Justice and Development Party (AKP) in Turkey brings about uneasiness in Egypt as fear over the growing Turkish trade and investment in Egypt arises.
The chemicals industry, one of Egypt's most diverse sectors that includes producers of fertilizers, plastics and tires, exhibits a significant growth in exporting with a 12.5% jump from LE 12.1 billion in 2006 to LE 13.6 billion in 2007. Egypt is also ranked number 13 on the list of best destinations for global IT outsourcing, and ranked number one in the Middle East and North Africa region, according to the research firm AT Kearney.
June
The German-based international wholesale food retailer Metro Cash and Carry announced it added Egypt to the list of the 29 countries that it operates in. The well recognized brand name, which will have to change to Makro so as not to be confused with the other Metro market in Egypt, is set to open by the end of 2009, making Egypt the second country after Morocco to host the food retailer in the North Africa region.
The Ministry of Trade and Industry releases figures naming Egypt's ready-made garment sector an import part of a surging textile export industry worth LE 9.9 billion. Raya Holding, for its part, was on its way to surviving the past two years of hostile takeover bids and bleak financials with LE 94.1 million in profits, up from LE 69 million in 2006. Revenues for June issue's bt 100 companies grew more than 22%, net profits increased at three times the rate of the year 2006, putting them at LE 47.51 billion.
Egypt's most famous coffee-shop brand, Cilantro's, opened its first overseas branch in London.
July
July takes a look at one of the fishing industry's worst periods as a result of a decline in fishing stocks due to over-fishing. The Red Sea's fish production has decreased to 46,940 tons-per-annum (TPA) in 2006 after being at 82,400 TPA in 1999. This lead to a heavy reliance on imports, in 2006 Egypt imported 207,564 tons of fish, which cost approximately LE 593 million.
Novartis Pharma SAE, a Swiss owned company, began exporting medicine to markets around the globe after an LE 18 million expansion. The company was established in Egypt more than 40 years ago and had since only exported to countries in the Middle East and North Africa (MENA) region.
El-Badr Plastics, a plastics packaging provider for the pharmaceuticals and food industries, and Masria cards, a manufacturer of smart cards, become the first two companies to join Nilex, Egypt's mid and small cap stock exchange that was announced by government and stock exchange officials in December of last year.
The National Telecom Regulatory Authority (NTRA) announced June of last year that it would be accepting bids from domestic and foreign companies to provide consumers with the right to choose their service provider. This month saw the 12 serious bidders being made to buy a mandatory book of 'rules for purchase' from NTRA for LE 53, 500, as well as provide an auction guarantee of LE 10 million.
August
The 2005 Euro-Mediterranean Roadmap for agriculture has set trade grounds between Egypt and the European Union (EU) allowing for agriculture and fishery to be imported and exported out of the two regions. Other outcomes from this agreement include allowing the EU greater access to the Egyptian market, as well as a 90% of its products duty-free. However, duties will remain on products such as tobacco, pork and wine, while duties on products like chocolate, pasta and bakery will be halved.
Tharwa Petroleum Company secured $100 million in credit from the National Bank of Egypt to expand new oil and gas exploitation and production projects. The projects will see the development of natural gas fields near the Mediterranean run by Tharwa subsidiaries. The capacity is expected to jump from 55 million cubic feet of natural gas to 87 million by the end of 2008.
September
Twenty cement executives were found guilty of price fixing, in violation of Law No. 3 of the Protection of Competition and Prohibition of Monopolistic Practices. Prosecuted in February, the companies and their executives were each fined LE 10 million after the court presented evidence the companies had conspired to set fixed prices in order to effectively share the cement market.
The NTRA announced yet another postponement of the fixed-line auction, leaving Telecom Egypt in sole control of the nation's landline services.
October
Emaar Misr denied its $12 billion (LE XX) Uptown Cairo project in Moqqattam caused the massive rockslide that killed 100 people in the shantytown of Duweiqa in early September. Three-and-a-half kilometers from the site, the project's golf courses were said to have been the culprit, with irrigation water permeating and loosening the rocks. Emaar CEO, Sameh Mohtady, fought back, saying the golf courses were still under construction at the time.
North Africa's first nanotechnology center came in the form of an agreement between IBM and the Egyptian government, which establishes a three-year, $30 million project focused on nanotechnology research. The project will begin in January 2009.
November
Egypt's Finance minister, Youssif Boutros-Ghali was voted the new chair for International Monetary Fund's (IMF) policy committee, making him the first person from a developing country to hold this position. Despite the criticism IMF has been receiving from world leaders regarding its stance and actions during the world financial crisis, minister of Investment Mahmoud Mohieldin believes Ghali to be an important asset. "I think the appointment of the minister of finance has sent a very positive signal to developing countries," he said adding that this can increase participation from developing countries and emerging markets.
The American University in Cairo (AUC) will be offering females the choice of obtaining certificates in entrepreneurships and leadership through joint programs with universities abroad. This program aims at teaching female entrepreneurs professional management and leadership skills, accounting, marketing, and how to access capital. This is particularly important since it's been estimated that 18% of micro, small and medium sized enterprises are owned by women. Participants will be selected according to their financial need and their proven ambition. Maha El-Shinnawy, director of this program expects a least 100 women to obtain this certificate by the end this 2008-2009 academic year.
By Tamer Hafez, Al El Bahnasawy, Erin Cunningham, Dina Basiony, Passant Rabie, Jeff Neumann, Ethar El Katatney, James Chester, Lindsey Parietti, Rebecca Collard, Erika Sherk, Jessica Gray, Kholoud Khalifa
© Business Today Egypt 2008
